Appeal details
Counselvise Citation
464619914 RSA 2010
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 year(s) 3 month(s) 17 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
22-09-2014
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
G
Next Hearing Date
22-09-2014
Assessment Year
2000-2001
Appeal Filed On
04-06-2010
Judgement Text
, IN THE INCOME TAX APPELLATE TRIBUNALG BENCH, MUMB AI BEFORE SHRI D.MANMOHAN, VP AND SHRI D. KARUNAKARA R AO, AM ITA NO. 4646/MUM/2010 ASSESSMENT YEAR-2000-01 GRAVITY REALTY PVT. LTD. MAHINDRA TOWERS, DR.G.M. BHOSLE MARG, WORLI, MUMBAI-400020 / VS. ITO WARD6(1)(2), AAYKAR BHAVAN, M.K.ROAD, MUMBAI-400020 ./ PAN :AAACG2096F /ASSESSEE ) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI RAJESH ATHAVALE / RESPONDENT BY : SHRI VIVEK BATRA -DR / DATE OF HEARING : 22/09/2014 / DATE OF PRONOUNCEMENT : 22/09/2014 / ORDER PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF THE CIT(A)-12, MUMBAI DATED 18/12/2009 FOR THE A.Y. 2000 -01. THE PRESENT APPEAL EMANATES FROM THE PENALTY ORDER PASS ED BY THE AO U/S 271(1)(C) OF THE ACT AND THE AMOUNT OF PENALTY LEVIED IS ` .39,93,905/- . 2. RELEVANT FACTS INCLUDE THAT THE ASSESSEE CLAIME D AN INTEREST EXPENDITURE U/S 36(1)(III) OF THE ACT. CONSISTENT W ITH THE ASSESSMENTS OF THE EARLIER A.YS., THE PRESENT AO IS OF THE OPINI ON THAT THE SAID CLAIM OF EXPENDITURE, BEING RELATED TO THE CAPITAL BORROWED AND UTILIZED FOR INVESTMENT IN SHARES OF THE GROUP CONC ERNS, IS NOT ALLOWABLE TO BUSINESS EXPENSES OF THE ASSESSEE AS T HE BUSINESS IS YET TO COMMENCE. ACTUALLY, ASSESSEE INTENDS TO UNDERTA KE THE CONSTRUCTION BUSINESS AND THE SAME HAS NOT COMMENCE D. 2 ITA NO.4646/MUM/2010. CONSIDERING THE BUSINESS IS YET TO COMMENCE, AS IN EARLIER YEARS, AO DISALLOWED THE SAID CLAIM OF ASSESSEE. FURTHER, THE AO ALSO DISALLOWED AN AMOUNT OF ` .3,77,018/- U/S 14A OF THE ACT. FURTHER ALSO, ON FINDING THE ASSESSEE EARNED SOME INTEREST INCOME, THE AO TAXED THE SAME UNDER THE HEAD INCOME FROM OTHER SO URCES. EVENTUALLY, AO LEVIED THE PENALTY U/S 271(1)(C) OF THE ACT ON THE SAID DISALLOWANCE. THE CIT (A) CONFIRMED THE SAME. 3. BEFORE US, REFERRING TO EARLIER YEARS, LD. COUNS EL FOR THE ASSESSEE MENTIONED THAT THE AO MADE A SIMILAR DISALLOWANCE R ELATING TO CLAIM OF INTEREST EXPENDITURE. THE PENALTY U/S 271(1)(C) OF THE ACT WAS LEVIED TOO ON THE SIMILAR CIRCUMSTANCES IN THOSE YE ARS. THE ISSUE OF SAID PENALTIES TRAVELLED TO THE ITAT VIDE ITA NOS.8 60/ MUM/ 2008 (A.Y.1997-98) AND 861& 862/MUM/2006 FOR THE A.YS.1998 -99 AND 2003-04 RESPECTIVELY. IN THIS REGARD, THE LD. COUN SEL BROUGHT OUR ATTENTION TO PARA 6 & 7 OF THE SAID ORDER OF THE TR IBUNAL DATED 21/04/2009 AND READ OUT RELEVANT PORTION TO DEMONST RATE THAT, IN THE SIMILAR CIRCUMSTANCES, WHERE ASSESSEE DISCLOSED ALL THE PARTICULARS IN THE RETURN OF INCOME, THE PENALTY IS HELD UNSUSTAINABLE IN LAW. THUS, THE ADDITION WAS SUSTAINED IN QUANTUM APPEAL AND HOWEVER, THE PENALTY U/S 271(1)(C) OF THE ACT WAS D ELETED. LD. COUNSEL ARGUED FOR FOLLOWING THE DECISION OF THE TR IBUNAL AND DELETE THE PENALTY UNDER CONSIDERATION 4. ON THE OTHER HAND, LD. DR OF THE REVENUE HEAVILY RELIED ON THE PENALTY ORDER OF THE AO AND THE IMPUGNED ORDER OF T HE CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE F ACTS AND ORDER OF THE TRIBUNAL DATED 21/04/2009. AS INDICATED, WE HAVE ALSO PERUSED THE RELEVANT OF PARA 6 AND 7 OF THE SAID OR DER OF THE TRIBUNAL (SUPRA). SO FAR AS THE PENALTY ON THE CLAIM OF INTE REST EXPENDITURE IS 3 ITA NO.4646/MUM/2010. CONCERNED, THE ISSUE STANDS COVERED IN FAVOUR OF TH E ASSESSEE. FOR THE SAKE OF COMPLETENESS OF THIS ORDER, THE SAID PA RAGRAPHS ARE EXTRACTED AS UNDER: 6. U/S 271(1)(C), IT IS VERY MUCH NECESSARY TO SEE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE AND IT HAS TO BE DECIDED WHETHER THE ASSESSEE CONCEALED ANY INCOME OR SUBMITTED ANY INACCURATE PA RTICULARS. IN SO FAR AS THE CONCEALMENT OF INCOME' OR INACCURATE PARTICULARS OF INCOME ARE CONCERNED, THE AO HAS OBSERVED THAT THE ASSESSEE'S CASE WAS NOT SE LECTED FOR SCRUTINY, THE ASSESSEE COULD HAVE BEEN BENEFITED IN FILING INACCU RATE PARTICULARS OF INCOME. IN SO FAR THIS OBSERVATION IS CONCERNED, IT IS 'NOT CLEAR EITHER FROM THE ASSESSMENT ORDER OR FROM CIT(A) ORDER THAT WHAT EXA CTLY THE INACCURATE PARTICULARS SUBMITTED BY THE ASSESSEE. AFTER CAREFU L PERUSAL OF THE RECORDS AND ALSO ORIGINAL RETURN OF INCOME FILED BY THE ASSESSE E U/S-143(1), IT IS CLEAR THAT THE ASSESSEE FILED ALL THE-PARTICULARS AND OTHER DE TAILS BEFORE THE AO AND THE AO REOPENED U/S 148 AND DISALLOWED THE INTEREST AMO UNT CLAIMED BY THE ASSESSEE. IN SO FAR AS THIS ASPECT IS CONCERNED WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE NEITHER CONCEALED ANY PAR TICULARS OF THE INCOME NOR FILED INACCURATE PARTICULARS OF INCOME. 7. THE EXPLANATION GIVEN BY THE ASSESSEE IS NOT CORRE CT BECAUSE THE HON'BLE ITAT FINALLY HELD THAT THE ASSESSEE IS NOT ELIGIBLE FOR THE INCOME EXPENDITURE CLAIMED AS A DEDUCTION BECAUSE THE ASSE SSEE NOT YET COMMENCED THE BUSINESS. IT IS A FACT THAT THE ASSESSEE FILED IN HIS RETURN OF INCOME DECLARING LOSS OF RS.L,53,40,239/-. ON THE BASIS OF THIS RETU RN OF INCOME HE HAS SUBMITTED HIS EXPLANATION. THEREFORE, IT CAN NOT BE SAID THAT THE EXPLANATION IS NOT BONAFIDE. WE, THEREFORE ARE OF THE CONSIDERED OPINION THAT THIS I S NOT A FIT CASE WHERE PENALTY UNDER SECTION 271(1)(C) WITH EXPLANAT ION I CAN BE INVOKED. WE ACCORDINGLY CANCEL THE PENALTY OF RS.70.00 LAKHS AN D RS.56,50,000 FOR AY 1996-97 & 1998-99 AND RS.15,75,000 FOR AY 2003-04 LEVIED BY AO U/S 271(1)(C) OF THE ACT. 6. FROM THE ABOVE PARAGRAPHS, IT IS FOUND THAT THE A SSESSEE IS YET TO COMMENCE HIS BUSINESS. UNDER THESE CIRCUMSTANCES , THE INTEREST EXPENDITURE CLAIMED U/S 36(1)(III) OF THE ACT WAS F OUND DISALLOWABLE ON MERITS. HOWEVER, IT IS THE FINDING OF THE TRIBU NAL THAT THE PENALTY IS UNSUSTAINABLE CONSIDERING THE FACT, THE ASSESSEE DISCLOSED ALL THE PARTICULARS IN THE RETURN OF INCOME FILED BY THE AS SESSEE. AOS DECISION ON THE COMMENCEMENT OF BUSINESS AND THE CL AIM OF INTEREST EXPENDITURE U/S36(1)(III) OF THE ACT IS ON E POSSI BLE VIEW MAKING THE 4 ITA NO.4646/MUM/2010. ISSUE DEBATABLE ONE. SIMILARLY, THE DISALLOWANCE U /S 14A OF THE ACT AS WELL AS THE TAXING OF THE INTEREST U/S 56 OF THE ACT ARE NOT FREE FROM DEDUCTIBILITY. THEREFORE, WE ARE OF THE OPINIO N, THE PRESENT ISSUE, BEING SIMILAR TO THE ABOVE, STANDS COVERED I N FAVOUR OF THE ASSESSEE. ACCORDINGLY, PENALTY LEVIED BY THE AO AN D CONFIRMED BY THE CIT(A) IS UNSUSTAINABLE IN LAW. ACCORDINGLY, GROUN D RAISED BY THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 22/0 9/2014. '# $ %& '' ( 22/09/2014 ) * SD/- SD/- D.MANMOHAN D.KARUNAKARA RAO (VICE PRESIDENT) (ACCOUNTANT MEMBER) MUMBAI , DATED: 22/09/2014 F{X~{T? P.S. '#+,- .- / COPY OF THE ORDER FORWARDED TO : (1) +/01 / THE ASSESSEE; (2) / THE REVENUE; (3) 2 3 / THE CIT(A); (4) 2 / THE CIT, MUMBAI CITY CONCERNED; (5) -4)++5/6 5/ 6% 7 / THE DR, ITAT, MUMBAI; (6) )809 / GUARD FILE. + / TRUE COPY '# / BY ORDER : / ; / (DY./ASSTT. REGISTRAR) 5/ 6% 7 / ITAT, MUMBAI,
Mehul